Tenaris SA Q2 FY2024 earnings call

• Sales remained resilient in the first two quarters despite reduced drilling activity and falling OCTG prices, with strength in North America's Rig Direct service model and offshore projects.
• Strong free cash flow of $774 million in Q2, with $285 million reduction in working capital. Renewed long-term contracts with Shell, ExxonMobil, and Woodside.
• Carrying out investment and maintenance stoppages in industrial systems, including major mill overhauls, new furnace installations, and wind farm construction in Argentina.
• Optimistic about regions with strong competitive positions driving future activity, leveraging global reach, product/service differentiation, and long-term agreements.

Second quarter sales reached $3.3 billion, down 18% year-on-year and 3% sequentially. The tubes operating segment had average selling prices down 17% compared to the corresponding quarter of last year and 1% sequentially, offset by favorable sales mix. EBITDA for the quarter was $650 million, down 34% sequentially. Without an extraordinary provision for litigation, EBITDA would have been $821 million. Operating cash flow was $935 million, capital expenditure $161 million, free cash flow $774 million. Net cash position at the end of the quarter was $3.8 million.

• Second half sales volume expected to be 10% to 15% below first half. Further price adjustments in the Americas to reflect market conditions. Margin expected to be around the lower end of the 20%-25% range.
• Sales in the US affected by high OCTG imports, destocking in Middle East, and uncertainties in Mexico and Argentina energy policies leading to delayed investments.

• High OCTG imports from Asian countries in the US affecting pipe prices and damaging domestic interests.
• Destocking trend in Middle East countries beyond expectations, impacting sales in the region.
• Uncertainties in Mexico's energy policy and Argentina's macroeconomic environment delaying drilling and infrastructure investment.

Q: Talk about margin progression in the back half and pipe logics in the US.

A: Paolo Rocca and Luca Zanotti discussed pipe logics stabilization, import reduction expectations, and margin expected to be around lower end of 20%-25% range.

Q: US market, destocking in Middle East, and share buyback.

A: Paolo and Gabriel Podskubka talked about US market demand, Middle East destocking affecting shipments, and share buyback program completion with Board to decide future actions.

Q: Investor presentation in September, litigation timeline.

A: Paolo mentioned investor presentation to update on company position, capital allocation, and industrial changes. Litigation in Brazil related to 2012 acquisition, with plans to defend position.

Q: Cost reduction, working capital, and 2025 outlook.

A: Paolo and Luca Zanotti discussed cost reduction plans for $200 million annual savings, working capital contribution continuing but not at Q2 level, and positive outlook for regions like Latin America with uncertainties in US elections and mergers.